August 06, 2008	Wednesday	Sha’aban 3, 1429

ISLAMABAD, Aug 5: Sponsors of private hydropower projects have sought a substantial increase in their sale rates to offset the increased cost of construction material and machinery and effects of general inflation.

Officials of the National Electric Power Regulatory Authority (Nepra) said that even the higher prices (increase of more than 50 per cent) demanded by the hydropower sponsors were far lower than those of thermal projects being carried out in the country.

Secondly, their prices will fall over 30 to 50 years’ life of the projects, compared with the thermal projects whose tariff will continue to rise because of fuel as a pass-through item. Similarly, hydropower projects are considered environment-friendly and their ownership stands transferred free of cost to the provincial and federal governments on completion of their contract life.

Based on these considerations, Nepra had a soft corner for hydropower producers and encouraged them to bring more investments to the sector, an official said.

Successive governments have been discouraging hydropower projects and have signed expensive thermal power contracts at 18 cents per unit.

On Tuesday, Nepra said it had completed a hearing to determine the tariff for the first-ever and largest 840MW private sector hydropower project which sought 7.59 cents per unit to be sold to Wapda.

A tariff petition filed by Suki Kinari Hydropower Project Limited on July 11 was admitted for hearing by Nepra on July 17.

The project will be set up in Paras village on Kunhar river, upstream of the Kaghan valley in Mansehra district of the NWFP. It will be a run-of-the-river project. The project will be built on the ‘own, operate and transfer’ basis and will supply electricity to Wapda’s National Transmission and Dispatch Company (NTDC) through a 500KV transmission line.

The cost of the project is estimated to be $1.4 billion (Rs98 billion). The sponsors of the project include Eden Inc Berhad of Malaysia, Dongfang Electric Corporation of China and Faysal Bank and Associates of Pakistan.

Similarly, Laraib Energy Limited, an 84MW project downstream Mangla, which has sold its 75 per cent equity to Hub Power Company, a subsidiary of International Power of the UK, has also urged the government to increase its tariff from 5.89 cents per unit to 7.5 cents because of cost escalation.

Nepra has yet to come up with its tariff determination on both the projects, but is expected to allow a tariff between seven and 7.5 cents per unit with some adjustments in calculation parameters.

Nepra has developed a speedy tariff determination mechanism for hydropower projects. The mechanism provides details and procedures at various stages of the project development and adjustment of cost re-openers i.e. civil work, resettlement cost and cost related to geological surprises and conditions.

At present, generation through hydropower is around 6,500MW, whereas this resource has a potential for around 40,000MW.